By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, Guangzhou Lingnan Group Holdings Company Limited (SZSE:000524) shareholders have seen the share price rise 51% over three years, well in excess of the market decline (18%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 23% in the last year.

Although Guangzhou Lingnan Group Holdings has shed CN¥536m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Guangzhou Lingnan Group Holdings became profitable within the last three years. That would generally be considered a positive, so we'd expect the share price to be up.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It is of course excellent to see how Guangzhou Lingnan Group Holdings has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Guangzhou Lingnan Group Holdings stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's good to see that Guangzhou Lingnan Group Holdings has rewarded shareholders with a total shareholder return of 23% in the last twelve months. That gain is better than the annual TSR over five years, which is 8%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Before forming an opinion on Guangzhou Lingnan Group Holdings you might want to consider these 3 valuation metrics.

Of course Guangzhou Lingnan Group Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.